Definition: An asset is a tangible, current good that an individual, corporation, or country can use to meet current needs and expects to earn future benefits from. An asset’s value depends on how it is used and the expectations for future benefits from it. Regardless of its form, an asset always has economic value because it provides certain benefits to the holder over time.
An asset may be anything of value any individual, company, or government owns. Examples include stocks, real estate, art, patents, and gold. It could also be anything that has any potential to be sold–at any price. An asset may be valued based on its future cash flows. Therefore, changes in market conditions affect asset value. A single stock or bond being purchased may have a different value depending on how it performs today vs. how it will perform in a trading environment.
Corporate assets can include cash, debt securities, marketable securities (e.g., company stock), goodwill, estimates of future profits and losses, tax reserves, and other intangible assets that are amenable to direct sales by the company. Assets are also reported on the balance sheet as part of the separate statement of comprehensive income, which reports the annual cash generated from operations plus changes in restricted cash and accounts payable and payable-equivalent balances receivable.
Personal assets can include bank accounts, investments, real estate, jewelry, precious metals (such as gold and silver), goodwill from doing business with an organization, rights to collect certain taxes (e.g., sales tax rebates), and perhaps stocks and shares in companies you may not have even heard of yet. Some assets may be worth more than others at particular times.
Business assets are generally identified through the utilization of current economic conditions and historical data. Key economic indicators include unemployment rates, investment income, market capitalization, and consumer confidence. There are three primary types of assets: static assets, dynamic assets, and services. Static assets are those that exist in the physical world and cannot be easily replaced or altered. Dynamic assets are those that change shape or content based on how customers use them. Services exist purely within the business and can be turned over to drive growth or profitability.
Current assets are things you can use right away. Repayable in kind are assets that you owe money to someone else but have a possibility of getting paid back eventually through income generated by the business.
There are three basic types of current assets: cash equivalents, marketable securities (securities that, like stocks, can be bought and sold on an exchange), and inventory.
Fixed assets generally have a useful life and are most valuable when the customer expects to own the asset for a long period (usually several decades). As companies mature and grow, their Fixed Assets approach the value of their variable assets. Fixed assets are often made of predictable and durable materials to be easily replaced when they wear out or break down. This type of asset is also known as tangible personal property or tangible built property.
Examples include land, buildings, machinery, equipment, inventory, and cash.
There could be lawsuits if things go wrong with the asset. Assets can be bought or sold on an investment market like the stock market. Some assets, such as patents or property rights, can be bought for cash and used immediately without waiting for the patent or property right to be acquired. Others must be held for a certain period (usually five years), after which they become available for sale. Fees may apply toward the asset’s purchase price, and there may be taxes due when selling it or when carrying out a change of ownership.